Chancellor accused over tax changes

Pay curb proposals are plunged into chaos as Sir Richard Greenbury admits that he was wrong
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The Independent Online

Sir Richard Greenbury last night accused the Chancellor of imposing tax changes on share options without reading his report on ways to curb excessive pay in the boardroom.

The accusation comes amid reports that there were deep rifts between members of the Greenbury committee. Tim Melville-Ross, the director-general of the Institute of Directors, David Simon, the chairman of BP, and Sir Richard himself were all said to have voiced reservations about the recommendations before they were published.

Another member of the committee, Geoff Lindey of JP Morgan Investment Management, hinted that the blame lay with advisers. He said that although the committee included some very eminent chairmen and chief executives, none of them was a tax or remuneration expert. "There was a list of professional advisers and we were relying on them for professional advice."

Towers Perrin, the firm which acted as the committee's advisers on executive remuneration, declined to comment.

For the IoD, Mr Melville-Ross said last night that something had to be done to protect those who were not high earners. "We have all got to take a deep breath and look at this again," he said.

For its part, the CBI is planning to call an emergency meeting of its taxation committee to draft new proposals to put before the Chancellor.

Last night's developments followed a week of hostility from business leaders who said that the report's recommendations on share options would hit hundreds of thousands of workers. Following publication of the report on Monday, the Government immediately introduced changes to make share options subject to income tax rather than capital gains tax. Furthermore, tax would be levied when the options were exercised, not sold.

But yesterday, Sir Richard said the committee, which he chaired, did not think through the proposals and its impact "on thousands of modestly paid people". He said he believed the Treasury's scheme should be revised to allow profits up to pounds 30,000 to be taxed at a much more modest rate as capital gains.

Across industry as a whole, an estimated 500,000 workers from shop floor to middle management may be hit by the tax changes.

At the freight transport group NFC an estimated 85 per cent of employees are shareholders, among them truck driver Dean Bartley, from Watford, Herts. He recently exercised 200 options on which, under the new rules, he would be liable for around pounds 50 tax. On Friday NFC granted 3.3m options at 163p to 3,000 staff, but Mr Bartley believes the new rules will deter some workers from investing: "If you risk buying shares in your own company you want to make sure you get something back."

He summed up the reaction of many of his colleagues to the Chancellor's tax decision: "It's certainly a vote loser."

Archie Norman, chief executive of Asda - where the staff share scheme has 36,000 members - was one of several senior industrialists to complain to the Chancellor.

"The Greenbury committee has made a straightforward and honest mistake," he said. "The tax changes were made in haste and should be altered as soon as possible."

An Asda spokesman said later that many employee shareholders would be pounds 50 to pounds 100 worse off as a result of the new tax regime.